Our investment principles explained

Clare brings our investment principles to life in this episode. Including some key things to consider before you get started, some tips to follow when you’re making your first investment decisions, and the importance of staying invested for the long-term through market ups and downs.

The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek independent advice.

Before you start

Clare takes to the streets to find out why some of the public are investing, before sharing some insight on what you might want to consider before you get started.

Clare: Hello, I'm Clare and welcome to Smart Investor the show that can help you get the most from your investments. If you're considering investing the prospect of good returns can make it seem like a great idea.

But don't rush in too quickly. Investing carries risk, and positive returns can't be guaranteed and you may lose money. It won't be a suitable option for everyone but it is worth considering for some people. So we took to the streets to find out who invests and why.

Person 1: So the key things I would want to invest for would be for my future, like a pension scheme.

Person 2: Just for financial security. When you have a large amount of money you want to make sure it can grow in the future.

Person 3: Well, the thing is, when you actually have spare cash around you can keep it in your bank or you can keep it in savings but you want your money to work for you. If it's not going to be for the short term, it's got to be long term. If you have a small family, you want to make sure what you invest in now is going to be available for them.

And it's teaching them the right way of using the money. Sometimes it's not only about glamorous spending it's about reinvesting the money, making sure you get good returns and keeping an eye on the market as well.

Clare: So future financial security seems to be one of the main reasons people invest. If you're looking to invest, there are some things to think about first. We've worked with our Behavioural Finance team at Barclays to develop some key investment principles.

Firstly, get your finances in order. Make a list of everything you've got coming in and going out every month. Look at what's essential spending. Is there anything you can cut back on to save money? Next, manage your debt, it can be a millstone around your neck. If you owe money on credit cards or have a loan look to pay those off first.

Before you consider investing, it's important to build up cash savings for emergencies like a boiler breaking down. Once you've built up that emergency pot, investing could be worth considering. You just need to be comfortable with the risks and have money you can put away for at least five years.

Don't forget insurance. You've probably got car and home insurance but what about your family? If something were to happen to you life insurance and critical illness cover could prove really important for your financial dependents. If you're not confident about making financial decisions do seek professional advice. An independent financial advisor may spot gaps in your finances identify goals and suggest investments to help you achieve them.

Remember that although we can't offer personal advice we're hoping each episode will provide you with the insight and tools you need to be a smarter investor. Just go to our website and find out more.

Staying invested

Clare also looks at the importance of staying invested for the long term, interviewing Karen Barrett – the Founder and CEO of Unbiased.co.uk – to find out ways investors can keep their nerve through the ups and downs of the market.

Clare: Hello, I'm Clare, and welcome to Smart Investor the show that can help you get the most from your investments. Although we can't offer personal advice we hope each episode will provide you with the insight and tools you need to become a smarter investor. To give your investments the best chance of earning a return you need to be patient.

By committing to long-term investing you give your money the greatest chance to grow. In this section, we'll take a look at slightly more advanced strategies to help you stay invested and manage your portfolio's performance. Joining me to talk about it is Karen Barrett the Founder and Chief Executive of Unbiased.co.uk the platform that connects millions of people to professional financial advice. Karen, why is it so important to stay invested and to stay in the market?

Karen: Historically, investments grow at a faster rate than savings. Particularly in this low-interest-rate environment savings aren't really giving much opportunity for return. Although history isn't a prediction of the future and there is a risk to investments generally, the faster growth rate means an opportunity to grow your wealth.

Clare: As you mentioned, there is a risk there is a chance you could see the value of your investments fall. But is there anything you can do to help reduce that risk?

Karen: Absolutely. There's a couple of ways you can reduce that risk. One is by diversifying the assets that you invest in. That means you're not exposing yourself to only one geographic area or sector. That means you're less affected by the stock market movements.

You can also regularly invest into your investments. That means putting the same amount in each month. This also smooths stock market volatility. It means you can buy when the market is high as well as when it is low.

Clare: But when it is low, and if you're seeing the markets fall and the value of your investments fall it's understandable why a lot of people can lose their nerve and want to sell out. How can you reduce that temptation to get out?

Karen: Absolutely. It can be alarming when you see the value of investments falter. I think the main thing really is to remember you're invested for the medium and long term and there will always be dips and peaks in the stock market and the general trend is to look for an upward growth trend. Of course, it can be really hard to time the market. You need to be really careful.

When is the right time to take your money out of the market? And again, when's it the right time to put back into the market? You could easily miss some of the best performing days, as well as avoid some of the worst performing. So be very, very careful when you're thinking about doing that. Additionally, where are you going to put your funds if you take them out? What are you going to do with them? There could be a potential cost impact of moving money in and out to consider.

Clare: Obviously it's about holding your nerve. Presumably it's not just a case of putting your money in and then doing nothing?

Karen: No, absolutely. You should always keep tabs on your investments and check they're doing what you'd expect them to do. It's also a really good idea to schedule in some regular reviews. Measure your investments against your plan and your goals. Also, if you are worried about your investment performance or have questions on where you should be investing next or your strategy, you should seek independent financial advice. They can really help you, they're experts in that area and can give you confidence that you're doing the right thing.

Clare: Thank you very much for that, Karen. To explore a little more about the principles of staying invested visit our website.

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The value of investments can fall as well as rise. You may get back less than you invest.

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In this series of handy investing updates, Clare Francis, director of Savings and Investments for Barclays Smart Investor, sets out to demystify personal investments, cutting through the jargon and helping you to become a smarter investor.

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